Loading...
Loading...
Franco-Nevada Corporation (TSX: FNV; NYSE:
FNV) has agreed to acquire a silver stream on production from the Antamina
mine ("Antamina") in Peru from Teck Resources Limited ("Teck"). Teck owns a
22.50% interest in Compania Miñera Antamina S.A. ("CMA"), the Antamina
joint venture company, along with partners BHP Billiton Plc (33.75%),
Glencore Plc (33.75%) and Mitsubishi Corporation (10.00%).
"Franco-Nevada is pleased to partner with Teck on the Antamina mine to
create our first pure silver stream," said David Harquail, President and CEO
of Franco-Nevada. "This further strengthens and diversifies our portfolio
with a proven, long-life, high-margin asset that will be immediately
accretive. This investment provides our shareholders with metal price
optionality over multiple cycles and potential further exploration and
expansion upside."
Transaction Highlights
-- A cornerstone investment : Antamina is an established mine that
commenced operations in 2001. The mine is owned and operated by some of
the largest and best regarded mining companies in the industry. The
partners at Antamina have invested over US$6.5 billion to date in
constructing and expanding the mine and its infrastructure.
-- A low-cost operation : Antamina is the 8th largest copper mine in the
world and is one of the lowest cost copper operations globally. The
low-costs are facilitated by the high grade reserves and resources as
well as the wholly owned mining infrastructure including a concentrate
pipeline and port facilities.
-- First silver delivery expected in fourth quarter : The effective date
for the transaction is July 1, 2015 and Franco-Nevada is expected to
receive 900,000 -- 1,100,000 ounces of silver (12,300 -- 15,000 GEOs
[1])
in the fourth quarter 2015. Annual silver stream contributions are
expected to average 2.8 - 3.2 million ounces going forward (38,200 --
43,600 GEOs [1]), with 2016 and 2017 silver deliveries expected to be
above average. Based on current expectations, and assuming spot
commodity
prices, Antamina would increase Franco-Nevada's GEOs and operating cash
flow by approximately 13% and 18% respectively.
-- Antamina mine plan : The mine contains total Measured and Indicated
resources ("M&I resources") of 1.1 billion tonnes of ore and Inferred
resources of 1.3 billion tonnes of ore [2]. Within the resource
envelope,
total reserves are 647 million tonnes of ore [2], which are currently
constrained by tailings disposal capacity. CMA is currently considering
options for storing additional tailings and alternative mine plans that
could result in significant mine life extensions. Current M&I resources
are sufficient to support over 20 years of open pit mining.
Historically,
a high level of Inferred resources have converted to M&I resources and
ultimately to reserves. With continued conversion and upgrading of
resources, the project could support mining for 30 -- 40 years.
-- Exploration and expansion potential : Beyond the alternative mine plans
currently being studied, there is resource expansion potential at depth
which may be amenable to bulk underground mining. Additionally,
Franco-Nevada remains exposed to any future throughput expansions as
well
as regional exploration potential (on existing CMA concessions) without
further capital or funding commitments.
-- Deal structured in Canada : All the parties to the agreement will be
residents of Canada.
Terms of the Agreement
-- Franco-Nevada will make a one-time US$610 million advance payment to
Teck
upon closing of the transaction. Funding is expected to occur in
early-October with first silver delivery to Franco-Nevada in fourth
quarter 2015.
-- The stream will be based on all recovered silver from Teck's
attributable
22.50% interest in the Antamina mine, subject to a fixed silver
payability of 90%.
-- Silver deliveries are scheduled for the 45th day after each calendar
quarter end based on the previous quarter's concentrate shipments.
-- Franco-Nevada will pay 5% of the spot silver price for each ounce of
silver delivered under the stream.
-- The stream will reduce by one-third after 86 million ounces have been
delivered under the stream agreement, estimated at current throughput to
be approximately 30 years.
-- The stream will be funded by a wholly-owned, Canadian subsidiary of
Franco-Nevada.
-- The obligation to deliver silver will be a joint and several obligation
between Teck as well as a single-purpose, debt-free entity holding
Teck's
direct interest in CMA.
-- Silver deliveries under the stream will be an absolute obligation of the
joint sellers and are not contingent on the availability of cash flow
from the project.
Antamina
Antamina is a well-established producing copper mine that has been in
production since 2001 and is one of the lowest cost copper mines in the
world. The deposit is a polymetallic skarn with associated regional porphyry
mineralization. The mine has reserves of 647 million tonnes grading 0.94%
copper, 0.98% zinc and 10.7 g/t silver and M&I resources (inclusive of
reserves) of 1,136 million tonnes grading 0.89% copper, 0.82% zinc and 10.6
g/t silver. Inferred resources at the project are 1,280 million tonnes
grading 0.84% copper, 0.66% zinc and 11.4 g/t silver.([2])
Beyond the known reserves and resources, Antamina hosts additional potential
open-pit and bulk/selective underground targets. There is also regional
exploration potential over a large, prospective land package of greater than
700km(2) .
The mine is an open pit operation processing approximately 150,000 tonnes
per day using conventional flotation, located in the Peruvian Andes 270 km
north-east of Lima, at an elevation of approximately 4,000 meters. It
employs over 3,000 people and is owned and operated by CMA. In 2014,
Antamina produced approximately 345,000 tonnes of copper, 211,000 tonnes of
zinc, 3.1 million pounds of molybdenum and 12.0 million ounces of silver
(with associated bismuth and lead).
Concentrates are pumped via a 302 km pipeline to the Huarmey Port on the
Pacific Coastline (300 km north of Lima) for shipping through port
facilities which are wholly owned and operated by CMA. Antamina produces
separate copper, zinc, molybdenum and lead/bismuth concentrates, with silver
predominantly contained within the copper concentrates, with additional
silver contained with the lead-bismuth concentrate.
Cobre Panama Commitment and Available Capital
Franco-Nevada has finalized the terms of a replacement precious metals
stream agreement for First Quantum's Cobre Panama project. Under the terms
of the revised agreement, Franco-Nevada's subsidiary, Franco-Nevada
(Barbados) Corporation will provide a US$1 billion deposit against future
deliveries of the gold and silver from Cobre Panama. This deposit will be
funded on a pro-rata basis of 1:3 with First Quantum's 80% share of the
capital costs in excess of US$1 billion. Execution of the revised
documentation is expected shortly and initial funding is expected to be
completed during October. Based on this timing, initial funding by
Franco-Nevada (Barbados) is expected to be US$330 million to US$340 million.
The changes from the original agreement have largely addressed standardizing
reporting arrangements and providing a mechanism for First Quantum to
utilize Cobre Panama as collateral while still maintaining the Franco-Nevada
(Barbados) security.
As of June 30, 2015, Franco-Nevada held over US$760 million of working
capital and marketable securities including over US$610 million in cash and
short-term investments and US$80 million of available-for-sale investments.
Franco-Nevada plans to fund the transactions using a combination of cash on
hand and partially drawing upon its US$750 million credit facility.
Franco-Nevada does intend to exercise the US$250 million accordion available
with its credit facility increasing it to US$1 billion. Following the
funding of the Antamina transaction and the initial funding of the revised
Cobre Panama transaction, Franco-Nevada will have liquidity of approximately
US$800 million between remaining cash on hand and its expanded credit
facility.
Conference Call Information
Management will host a conference call this morning, October 7, 2015 at 8:00
a.m. Eastern Time to discuss the transaction.
Interested investors are invited to participate as follows:
-- Via Conference Call: Toll-Free: (888) 231-8191; International: (647)
427-7450
-- Conference Call Replay: A recording will be available until October 14,
2015 at the following numbers: Toll-Free (855) 859-2056; International
(416) 849-0833; Pass code 54886947.
-- Webcast: A live audio webcast will be accessible at
www.franco-nevada.com.
Loading...
Loading...
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Posted In: NewsPress Releases
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in